04/30/2009 05:12 am ET | Updated May 25, 2011

Why We Need a Council of Psychological Advisors

After President Obama figures out how to bring the economy out of recession, stabilize financial institutions, end two wars, and get every citizen health insurance, there is something important that he should turn his attention to. The U.S. needs a Council of Psychological Advisors that parallels the Council of Economic Advisors. There are many current problems that such a council could help solve. There are many policy aims, articulated by Obama during his campaign, to which a Council of Psychological Advisors could contribute. Such a Council would of course not replace the Council of Economic Advisors. But when economists have the President's ear, all their whispers concern incentives and self-interest. We need people whispering in his other ear.

The Economy
. What happened to our financial institutions? Most accounts I've read have focused on greed, fear, and (lack of) trust. And why did things get so out of hand? Why was there a housing "bubble"? Somehow, "irrational exuberance" (Robert Schiller) or "animal spirits" (John Maynard Keynes) overwhelmed rational calculations of risk and reward. And it isn't just that irrational optimism, or even blindness to market fundamentals, gets the better of our rational faculties. Rather, as George Soros has pointed out in his most recent book, these psychological phenomena can become part of a positive feedback loop that actually changes market fundamentals. "Reflexivity," he calls it. The housing bubble was not the first such phenomenon, nor will it be the last. Economists offer little that helps us understand why such bubbles occur or how they might be prevented. They largely make assumptions about the rationality of human decision making and proceed from there. Witness Alan Greenspan's recent admission that he was mistaken to assume that markets would operate rationally and efficiently. These assumptions are false, and the current crisis makes it clear that ignoring the real psychology of greed, fear, trust, and irrational enthusiasm can be perilous. A Council of Psychological Advisors could help.

It could help the economy in other ways, too:

• Getting out of the current recession (depression?) will require a certain amount of confidence or optimism on the part of investors and consumers. Psychologist Martin Seligman and his many collaborators, including my colleague Jane Gillham, has developed tools for building realistic (that word is important; we don't want people laughing and smiling as the world crumbles around them) optimism.

• Sometimes we need to encourage people to spend, and other times we need to encourage them to save. Psychology, with insights generated by Daniel Kahneman, Amos Tversky, and economist Richard Thaler, can help. For example, tax rebates that are a part of your weekly paycheck are more likely to be spent than tax rebates that come in a lump sum. Happily, the current stimulus plan includes tax rebates in this much more spendable form -- the product of advice from economists who take psychology seriously.

. One of President Obama's top priorities will be improving the quality of American education. This will require recruiting and retaining excellent teachers and finding ways to motivate students. How can this worthy goal be achieved? At the moment, we're pointing in the direction of school choice and competition to produce better schools, higher pay to produce better teachers, big tests to monitor their performance, and financial incentives to motivate students. Will these kinds of measures be enough? Research in psychology suggests not. More important than pay (as long as it is adequate) are working conditions that allow teachers to be flexible, autonomous, and creative in their work with students, and that provide teachers with a sense that they are working in a community that has a common purpose. Amy Wrzesniewski has explored the power of approaching ones work as a "calling" rather than a "job" or a "career." We need to create conditions that nurture teachers who are "called" to teach. From this perspective, the regimentation of instruction ushered in by big-test accountability is actually counter-productive. And Angela Duckworth has shown that "grit" -- perseverance -- is more important than IQ in predicting performance in a wide array of settings. We need to hire teachers with grit.

And instead of paying students for showing up to class and for getting good grades, we need to exploit the findings of Carol Dweck, who has shown that small differences in the way teachers and parents talk to their kids can produce large differences in how those kids perform in school. A Council of Psychological Advisors could help design environments that encourage students to pursue mastery rather than money and teachers to view their work as a calling.

Health Care
. Everyone should have health insurance. This is necessary, but not sufficient. The cost of health care must come down. Computerized medical records that produce coordination of care will help bring down costs, but it also isn't sufficient. We need to help patients (and their doctors) understand how to think about the efficacy and the risks involved in various medical procedures, so that fewer unnecessary, or even harmful (but costly) procedures will be undertaken. There is plentiful evidence, much of it gathered by Gird Gigerenzer, that patients make serious mistakes in thinking about risks and efficacy, and that their doctors make the very same mistakes! These mistakes can be dramatically reduced if attention is paid to the format in which medical information is conveyed.

Moreover, even if we computerize everything and communicate information about risks and efficacy of treatments more effectively, we will still have a healthcare cost explosion. Most medical care in a developed country like the U.S. involves management of chronic diseases (hypertension, heart disease, diabetes, asthma). Patients can live, often in states of diminished capacity, with these conditions for many costly years. Unless we can manage these conditions more effectively, costs will continue to escalate more than we can afford. Managing these conditions well demands that patients be partners. Patients need to make lifestyle changes (eg., diet, smoking, and exercise) that are often difficult to adhere to. A Council of Psychological Advisors can help develop interventions that will make patients into more committed healthcare partners.

The Environment
. Incentives (investment tax credits, energy taxes, pollution credits) will probably help, but focusing exclusively on these neglects the extraordinary opportunity to call on citizens to do the right thing because it's the right thing. Indeed, there is even evidence that incentives can undermine our desire to do the right thing. In a Swiss study of citizen-willingness to have a nuclear waste dump located in their communities, researchers found that whereas 50% of citizens agreed (reluctantly) when no incentives were involved, only 25% agreed when substantial incentives were involved. Each of us can contribute in small ways to reducing America's environmental footprint. A Council of Psychological Advisors can help in crafting appeals to citizens to do their duty.

What It's All For
. Finally, let us ask the most fundamental question: what is public policy for? We aim to increase collective welfare, but just what does welfare consist in? For the most part, under the sway of economic thinking, our aim has been to make the country more prosperous--to increase per capita GDP. The appeal of this goal is two-fold. First, we assume that if people are richer, they will be freer to choose as individuals the objects and activities that serve their welfare. We (the state and its technocrats) don't have to choose for them. So wealth serves as a proxy for everything else. And second, GDP can be measured. But like a drunk looking under a lamp post for his car keys, even though he dropped them someplace else (because "that's where the light is"), it doesn't help much to pursue what you can measure if what you're measuring is the wrong thing. It doesn't help to get better at achieving goals if you're achieving the wrong goals. Much research in the psychology of well being suggests that some wealth-enhancing policies improve welfare, but others do not. Indeed, some of what it takes to get more prosperous may be counterproductive when it comes to well being. A Council of Psychological Advisors can help here too, in the design of a system of national "psychological accounts" that does a better job of measuring well being than per capita GDP ever could.

Many of us hold out the hope that the coming Obama administration will mark a return to respect for knowledge and expertise. Agencies will be run and staffed not by political cronies, or by people who "just know in their gut" what needs to be done, or by ideologues, but by people who actually have respect for evidence. It would be a shame to bring experts on board in existing agencies, only to have them have to rely on personal intuition rather than knowledge in formulating policies and making decisions that could benefit from psychological expertise. A Council of Psychological Advisors is long overdue. This would be an excellent time to create one.

It's Not "Big Brother." Some of you may be a little nervous that were a Council of Psychological Advisors to be created, we would all be subject to manipulation by the government, being induced to act against our will and against our interests by "puppet masters" in Washington. I don't want to suggest that this can't happen. But ask yourselves this: What are "incentives" (whether tax incentives from government or bonuses from firms or payoffs to teachers and students) if not efforts at manipulation. We don't think of them as manipulation for two reasons. First, we're used to them. And second, we've bought into the "rational actor" model pushed by economists. "Rational actors" consider incentives, do utility calculations, and then make "rational" choices. Because all this is "deliberate" and "reasoned" there's no "manipulation" involved. The problem, as a generation of psychological research makes clear, is that this "rational actor" model is a fiction. It's a faction both because it is manipulative and because it doesn't work very well.

What I have in mind does not involve puppet masters behind curtains. The idea is to create motivational opportunities by enabling people to achieve what they really care about (teachers), to nurture curiosity (students) to present health information so that patients can actually understand it, and so on. It is no more or less manipulative than what we currently do, but acknowledges the diversity of human motives, and the imperfection of human reason.

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